Driven by ‘Make in India’ initiative, slashing imports, keeping a tab on domestic prices and exploring alternate overseas sources for coking coal are set to top the government’s agenda for the steel sector in 2020 while players expect a “break out year” for the industry.
After 2019 saw the domestic market grapple with surge in imports, increased dependence on imported coking coal from select countries, the steel ministry will be focusing on managing availability of iron ore as leases of a clutch of mines are scheduled to expire in March next year.
A few rating agencies and merchant miners have expressed concern that the country may face a short-term disruption in supply of iron ore used in making steel due to the transition phase.
“Managing iron ore availability will be among our targets. We will monitor this (situation) as iron ore is a requirement of our industry. It will be a major task for us. We will keep a watch that prices do not go up and iron ore is made available at a competitive rate to the industry,” Steel Secretary Binoy Kumar told PTI.
India would see a clutch of mining leases for coal and iron ore expiring by March 2020 and under the amended Mines and Minerals (Development and Regulation) Act. These leases will not be renewed, which means fresh auctions will be done.
In efforts to reduce dependence on select countries for coking coal, Kumar said the government is already in talks with Russia and Mongolia. Currently, it is dependent on few nations like Australia, the US and Canada.
Around 85 per cent of the country’s coking coal demand is met through imports.
“We will also continue to look for alternative sources to make coking coal available which will reduce dependence on select countries, and exploit the coking reserves in the country,” he said.
Kumar said the priority will also be to reduce imports and increase exports of steel. Around 7-8 million tonnes of steel is imported annually.
Indian Steel Association (ISA) Assistant Secretary General Arnab Hazra said the new year will be the year of hope for the Indian steel industry – “the breakout year” for the sector – and stressed that resilience of the industry will stand out.
The industry is hoping 2020 will see increased demand for steel, better prices and development of new products.
Jindal Steel and Power (JSPL) Managing Director V R Sharma said iron ore prices are expected to go up again in January 2020 by Rs 1,000 to 1,500 per tonne.
Terming the country’s steel market as “one of the most promising steel markets in the world”, ArcelorMittal said it would to contribute to India’s expansion in infrastructure and urbanisation in the coming decades.
Steel magnate L N Mittal’s ArcelorMittal, which recently completed the takeover of Essar Steel, will work on its plans of expanding business in India.
Jayanta Roy, Senior Vice-President and Group Head, Corporate Sector Ratings, Icra, said the current fiscal has seen margin pressures being faced by the domestic steel players, given weak demand conditions and a sharp fall in realisations.
“For the next fiscal FY2021, demand revival will largely depend upon infrastructure investment by the union and state governments. Moreover, there could be cost pressures because of iron ore, if auction of iron ore mines in Odisha and subsequent operations of those mines are delayed significantly, negatively impacting availability,” he noted.
A Tata Steel official said the industry hopes 2020 to be better, particularly the second half as compared to the second half of 2019 when the industry faced a slowdown in the auto sector which impacted the steel sector as well.
“The first half of 2020 will be better with the new Budget and start of new projects and the second half, we anticipate, will be very good,” the official said.
Noting that slowdown in growth was quite visible in the latter part of 2019, Seshagiri Rao — Joint MD and CFO of JSW Steel and Group said the main reasons behind it were the lack of credit from the banking system as well as cut in government expenditure.
“There have been some green shoots of recovery in October and November 2019. We expect the first quarter of 2020 to be better than the December quarter as we are seeing demand coming back on the retail side and in government projects.
“The demand for steel from the auto sector has improved. India’s spending on infrastructure is expected to drive the steel industry’s growth in 2020. Activity is restarting in areas like pipelines, bridges, construction, and metros,” Rao noted.
Pankaj Malhan, CEO of Electrosteel Steels Pvt Ltd said the company is extremely bullish on the new year where India is poised to grow strongly banking on the structural reforms and the rebounding economy, thereby leading to higher capacity utilisation.
“The reforms in the coal mining sector along with linkages in the iron ores will further strengthen the sector and will help raise its contribution to GDP from 2 per cent in the near future, creating thousands of jobs. The sector will also look forward to new product development, to create a differentiation for the commodity, make it more retail oriented and make India a hub for low cost, high grade steel,” he said.
Source: Business Standard